Wednesday, January 23, 2013

Bubbling Up...1/23/13

Second, as Figure 2 shows, the total number of articles published in the top journals declined from about 400 per year in the late 1970s to around 300 per year in 2010-12. The combination of rising submissions and falling publications led to a sharp fall in the aggregate acceptance rate, from around 15% in 1980 to 6% today. Currently, QJE is the most selective of the top-five journals, with an acceptance rate of around 3%, followed by JPE and RES, with acceptance rates of around 5%. The least selective of the top-five are AER and Econometrica, with acceptance rates of around 8%.

Over time, and especially during the last 15 years, it has become increasingly difficult to publish in the top five journals. Other things equal, this suggests that hiring and promotion benchmarks based on top-five publications (e.g., “at least one top-five publication for tenure”) are significantly harder to reach. (emphasis added)

Woj’s Thoughts - Although I can’t find a link at the moment, recent work in this field also shows the age of author’s publishing in the top journals rising over the past several years. As an aspiring academic in the field of economics, the combination of these results is slightly demoralizing. However, the recent introduction of a few new journals provides reason to hope the landscape may be changing. The path forward will be difficult in either case, but I have faith that hard work and persistence will ultimately lead to attainment of my professional goals.2)The Coin is Dead! Long Live the Coin! by Michael Sankowski @ Monetary RealismNoah Smith asks afunny question on Twitter:

”Hey, anyone remember the trillion dollar coin? ^_^ ”

I’d sayPaul Krugman andSteve Waldman remember the trillion dollar coin quite well. So do all of the people listed by Steve Waldman in the beginning (and the end, Frances andAshwin!) of his post.

Then, the debt ceiling came along and changed the coin from “funny and interesting idea” to “necessary if we want toavoid an economic meltdown“. That debate catapulted the coin to fame, and fortunately kickstarted the debate Paul K, Steve W and others are having now.

Woj’s Thoughts - With an apparent temporary resolution to the debt ceiling, this debate has died down over the past several days. For those who might not normally read through the comments sections, I highly recommend making an exception for the discussions that took place onScott Fullwiler’s post and all of Waldman’s. If that’s asking too much, at least check out my contributions to the debate (see here, here, and here) because as Mike notes, “Joshua Wojnilower (Woj) gets it right away.”3)Is Chinese re-balancing bullish? by Cam Hui @ Humble Student of the Markets

Rebalancing = Growth slowdown

So a move to re-balance growth to the household sector good news and bullish for stocks and risky assets? Well, not in the short term. Here is Pettis' arithmetic:

"But let us...give China five years to bring investment down to 40% of GDP from its current level of 50%. Chinese investment must grow at a much lower rate than GDP for this to happen. How much lower? The arithmetic is simple. It depends on what we assume GDP growth will be over the next five years, but investment has to grow by roughly 4.5 percentage points or more below the GDP growth rate for this condition to be met.

If Chinese GDP grows at 7%, in other words, Chinese investment must grow at 2.3%. If China grows at 5%, investment must grow at 0.4%. And if China grows at 3%, which is much closer to my ten-year view, investment growth must actually contract by 1.5%. Only in this way will investment drop by ten percentage points as a share of GDP in the next five years.

The conclusion should be obvious, but to many analysts, especially on the sell side, it probably needs nonetheless to be spelled out. Any meaningful rebalancing in China’s extraordinary rate of overinvestment is only consistent with a very sharp reduction in the growth rate of investment, and perhaps even a contraction in investment growth." (quotation marks added for clarity)

Woj’s Thoughts - Many analysts, not including Cam or Michael Pettis, continue to under appreciate the degree to which actual re-balancing in China will dampen growth prospects. This is precisely the difficult policy decision facing China’s leaders today. So far, China has responded to slower growth by increasing investment (fiscal stimulus) and thereby reversing re-balancing efforts. While this will likely boost GDP in the short-term (as seen in Q4 2012), correspond increases in “financial fragility” will only serve to exacerbate the downside in the longer-run.

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